The economics of preg-checking

Research: News Roundup from the October 2017 issue of Canadian Cattlemen

The major economic benefit of preg-checking is the money saved by not wintering open cows. However, it has been noted that preg-checking is not always worthwhile, as the increased revenue due to higher prices for cows in the spring and the additional weights put on in the winter could more than offset winter feeding costs.

The economics of preg-checking depends on the cull cow market price, the management system employed by the producer, feed and overhead costs, and veterinary costs. As market dynamics change every year, it is important to consider the current market situation when making preg-checking decisions.

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Alberta cow prices experienced an impressive rally in the first half of 2017 but the seasonal decline has been sharp since June. Cow prices are under pressure this summer due to cattle supplies, dry pasture conditions in southern Alberta and Saskatchewan, and low exports to the U.S. On the other hand, the sharp decline in beef imports from Australia could result in stronger demand for domestic lean trim products and support cow prices this fall.

Using the Beef Cattle Research Council’s (BCRC) Economics of Pregnancy Testing Beef Cattle Model, the potential economic gain or loss can be estimated for the following three options:

Preg-checking and culling cows in the fall,

Preg-checking and feeding open cows separately, or

Not preg-checking and feeding cows over winter under different overwintering management systems and price scenarios.

Basic cow herd information and fall cull cow prices are needed for the calculation. The 2005-14 cull cow price data used in the model has been updated to the current 10-year (2007-16) average for this analysis.

The analysis assumes a 160-day overwinter feeding period and a 7.7 per cent herd open rate. The assumptions on cost and average daily gain (ADG) for the overwintering systems are shown in Table 1 below. For the separate feeding scenario, the cost of production is assumed at $1.90/cow/day, ADG of 1.6 lbs., and a 140-day feeding period.

photo: Beef Cattle Research Council

Regarding cow prices this fall, cow supplies typically trend larger moving into fall, and bottom in the fourth quarter. The decline from summer peak to the fall low over the last five years has averaged 15 per cent and implies cow prices around $95/cwt this fall. Given the big swing in prices this year, the seasonal decline could be steeper. A 20 per cent drop would bring prices to $90/cwt around the five-year average low, and a 25 per cent decline would bring prices closer to the 2016 low of $85/cwt. Over the past five years, the seasonal decline had ranged from 16-33 per cent, with 2014 being the only exception as prices traded counter-seasonally higher in the fall.

Cow prices have increased from November to March in nine out of the past ten years (2007-16), with the exception being 2015. The percentage increase ranged from 14 to 55 per cent with an average of 27 per cent.

Based on the long-term price seasonality and the above assumptions, the model generally projects economic losses for the “preg-check and cull in the fall” option compared to the “no preg-check and cull in spring” option. For the swathed barley and standing corn grazing winter management scenarios, the model projects economic gains for the “preg-check and feed separately” option compared to the “no preg-check and cull in spring” option (see Table 2 below).

photo: Beef Cattle Research Council

Higher cull cow prices favour not preg-checking and culling in spring over preg-checking and culling in the fall as every additional pound will be worth more. It should be noted that the projections above are based on a 27 per cent price increase from November to March. If cow prices are flat during this fall to spring 2018, preg-checking and culling early could be worthwhile. Reducing the assumption on November-March price increase to five per cent, the preg-checking and culling in the fall option will be worthwhile in most price scenarios for the drylot, swath barley and standing corn grazing winter management systems (see Table 3 below).

photo: Beef Cattle Research Council

The above scenarios show that feeding cull cows separately provides the greatest economic benefit this year for the swathed barley and standing corn grazing management systems. The gains are driven by the higher price in the spring, ADG of the separate feeding group, and the length of the feeding period. Changing these assumptions could result in a different conclusion. For example, if the separate feeding period was shortened to 90 days, even with an increased ADG to 1.8 lbs., the separate feeding option is projected to result in economic losses compared to the no preg-check option in all scenarios (see Table 4 below), as the increased revenues from the additional weight gain were not large enough to offset the additional costs.

photo: Beef Cattle Research Council

The BCRC’s Advanced Economics of Pregnancy Testing Beef Cattle Model provides the flexibility of entering your own overwintering costs, ADG, length of winter feeding period and other variables. To test it out visit the decision making tools section of the BCRC website at www.beefresearch.ca.

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